http://www.newswire.ca/en/releases/archive/December2010/10/c4263.html
Summary
At the end of the third quarter ended October 30, 2010 sales for Le Chateau had decreased by 1.2% which in further analysis shows a decrease from last year’s third quarter from $75.3 million to $74.4 million. In continuity to this situation, in store sales decreased by 3.5% which adds to the negative impact against Le Chateaus total earnings which are displayed in their cash flow statement. In addition, net earnings for the third quarter ended October 30, 2009 decreased from 5.6 million to 2.7 million for the third quarter ended October 31, 2010. Earnings per share were also diluted for the third quarter from the previous year amounting to $0.23 per share to $0.11 per share. In the first nine months of the year Le Chateau opened 9 new stores, closed 4 stores and expanded 17 of their existing locations. These factors played a large role and added on to the spending costs for Le Chateau which did not benefit Le Chateau when it came to helping with sales. All in all, Le Chateau was hit hard this year not being able to meet their total sales goals for the year.
Connection
Le Chateau’s Cash flow statement shows that for the three months ended October 2010, a decrease in Net earnings of $2913 from the previous year’s results and an even larger amount from previous years. This tremendous change in Net earnings is a significant sign that Le Chateau was not able to meet their financial goals for the months ended October 2010. Shown in the Financial Activities section of the cash flow statement, Le Chateau is still currently paying off a long-term debt. In addition to their debt, Dividends are still needed to be paid off to various shareholders. Being in no position to be able to pay off these debts and payments to various businesses, Le Chateau was not able to be financially strong during this time period. In further analysis, Le Chateau’s cash and cash equivalents at the beginning of the period were deducted an amount equaling $6,221; they began with $15,967 and ended with $9,746. This shows the amount of money Le Chateau had lost during the three months ended October 2010 from spending cash on various attributes to the company. Many of the factors pertaining to the cash flow statement had a negative impact which ultimately had a negative impact on the company’s performance as a whole.
Reflection
From my understanding, Le Chateau was faced with an unpleasant situation during these three months ended October 2010. Their business was impacted by a lack of sales in which caused their Net earnings account to have plummeted compared to previous years. Although Le Chateau was hit with unfortunate circumstances it is possible for them to regain lost interest from consumers. Le Chateau, being a store for contemporary fashion apparel, accessories and footwear, will most likely make a striking increase in their sales during this time of the year due to many graduates looking for suits and dresses for graduation. In addition, their sales may have not been so great during the three months ended in October due to the fact that weather conditions were not suitable for their type of fashion apparel. Warmer weather is starting to be more visible in which consumers will be able to wear fashion apparel made by Le Chateau.
On your reflection, I do agree with the possibility of the decrease in sales because of the weather and time of year. But Le Chateau’s net earnings have been decreasing for the past year as well. It hasn’t been just one period where their sales have been plummeting, it’s has been for awhile already. The negative impact might come from the company spending more on other things like the new expansion and new costs that come with it; which makes the outflow of cash more than what’s coming in. Le Chateau might want to reassess their strategies because right now closing 4 stores then expanding 17 new stores don’t seem to make logical sense with their existing expenses as it already is.
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